Russia's economy ministry sees GDP growth at 2.4% in September

Russia's economy ministry sees GDP growth at 2.4% in September
Russia's GDP has rose 2.4% y/y in September / bne IntelliNews
By bne IntelliNews October 23, 2017

Russia's GDP expanded by 2.4% in September 2017 in year-on-year terms and by 2.2% in the third quarter overall, Minister of Economic Development Maxim Oreshkin told Russian President Vladimir Putin on October 20, as cited by Reuters.

Previously the ministry of freshly appointed Oreshkin had upgraded the GDP outlook to over 2% in 2017-2020, hoping for a structural lift from labour productivity measures yet to be implemented.

"Overall the ongoing [economic] recovery is continuing," Oreshkin told Putin. RosStat agency estimated that Russia's GDP expanded by 2.5% y/y in the second quarter and by 0.5% in the first quarter of 2017. 

"Given that the strong spike in the GDP growth rate to 2.5% y/y in 2Q17 was mainly considered a one-off, maintenance of the economic growth rate above the 2% mark could be regarded as a positive surprise," Gazprombank commented on October 23.

According to the minister, the positive economic dynamics are set to continue in the coming quarters due to recovery in wages, as well as crediting and investment activity. While previous reports showed that consumption is indeed on the rise, the government's investment growth forecasts were recently doubted by the Chamber of Accounts.

Gazprombank also believes that the industrial output dive to 1.4% y/y growth in the third quarter from 3.8% y/y seen in the second quarter was offset by firmer recovery in consumption and retail sales, as well as a bump the agriculture sector got from the record-high harvest.

This means that given that agricultural activity is seasonal in nature, it is unlikely to lend support to economic growth in 4Q17, Gazprombank warns, but consumption growth is expected to continue.

Gazprombank thus believes that its full-year guidance for GDP growth at 1.5% y/y could be exceeded. Analysts surveyed by Reuters at the end of September expected full-year GDP growth of 1.8%. The Central Bank of Russia sees economic growth at 1.7-2.2%.

Most recently the International Monetary Fund (IMF) improved Russia's GDP growth outlook to 1.8% in 2017 and 1.6% in 2018, up from 1.4% for both years previously.

The IMF joins a recent spate of upward revisions for Russia’s economic growth and attributed it to stronger global financial stability, slower inflation, output gains, and ruble strengthening. 

The fund still sees risks to the outlook from oil price volatility, the ongoing capital outflow, and deepening of the sanctions against Russia's largest oil and gas companies and banks.

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